Marketplace Report: Wal-Mart's China Strategy

MADELEINE BRAND, host:

Back now with DAY TO DAY. The world's biggest retailer is about to become a lot bigger. Wal-Mart has offered a billion dollars to buy the Chinese department and grocery store chain Trustmart. If China's government approves the sale, Wal-Mart will become that nation's largest retailer. Joining us is John Dimsdale from MARKETPLACE. And John, is Wal-Mart trying to conquer China here? How big are its ambitions?

JOHN DIMSDALE: Well, you know, China right now is the fastest-growing economy in the world. Consumer sales are rising 15 percent a year. There are more customers there than in all of North America and Europe combined. All sorts of retailers are moving in: Home Depot, Ikea, Best Buy. So this company that Wal-Mart is buying, Truemart - it's Taiwanese-owned. It already has a hundred stores in China. It's apparently a real plum. It's been attracting a lot of business interest. Other international department store chains have been bidding for Trustmart, and by winning the competition, Wal-Mart now gets a head start in this huge Chinese market.

BRAND: But Wal-Mart has gone into other countries and has encountered some problems.

DIMSDALE: That's right. Last summer, remember, Wal-Mart pulled out of Germany, where it failed to compete with other discounters. In Germany, unions and labor rules are strong, and that hurt Wal-Mart's business plan there. But earlier in the year, Wal-Mart sold its stores in South Korea. It's struggling in Japan. Even here in the U.S., Wal-Mart sales growth has been slowing while competitors like Target have been gaining.

Plus, Wal-Mart faces opposition from some cities and local governments for its low salaries and lack of health benefits. Some governments are trying to force Wal-Mart to provide better health insurance. They argue the company's workers are forced to tap into local welfare and public-health programs.

But Wal-Mart's also fighting organizing attempts by some of its workers in this country and in others. The company is decidedly anti-union. Just yesterday, in a store outside Miami, a group of workers staged a walk-out to protest new store policies on absences from the job and shorter work hours.

BRAND: And what kind of problems does it potentially face in China?

DIMSDALE: Well, it could have the same sorts of hurdles. Chinese officials have been trying to beef up worker protections and promote organizing. Last summer, Wal-Mart was forced to allow its Chinese workers to join a union for the first time. And for all its growth potential, China isn't an easy place to do business. Wal-Mart's model is to be such a large purchaser of goods that it can force suppliers to give it the best prices. This new takeover of Trustmart is a step in the direction, but China's customers are still very fragmented and hard to reach.

Coming up later today on MARKETPLACE, we'll find out why Democrats are suddenly hot commodities in the lobbying offices in Washington, D.C.

BRAND: Thank you, John. That's John Dimsdale of public radio's daily business show MARKETPLACE, produced by American Public Media. Transcript provided by NPR, Copyright National Public Radio.